Hawkeye Pitching 3rd Seed-Capital Vehicle
Seed-capital firm Hawkeye Partners has begun marketing its third fund, which is looking to raise $850 million of equity to back real estate investment managers.
The vehicle would invest in 3-5 firms seeking to manage institutional capital for the first time. Hawkeye targets two main groups: super-regional or national investment firms with long track records that have never previously raised outside equity; and new shops formed by veteran teams from experienced fund operators.
Austin-based Hawkeye looks across asset classes and would consider backing a debt platform. The vehicle, Hawkeye Scout Fund 3, would target an 11-13% return. That’s lower than the prior two funds in the series. The shop has told investors the reduction reflects compressing capitalization rates on property deals.
Backers of predecessor funds include California State Teachers, North Carolina Public Employees, Pennsylvania State Employees and Wisconsin Investment. Hawkeye doesn’t use a placement agent, instead approaching investors directly.
Scout Fund 3 will charge a management fee of 1.25% for commitments less than $50 million, 1% for pledges of $50 million to $100 million, and 75 bp for equity checks of more than $100 million. After investors receive an 8% preferred return, Hawkeye is entitled to 10% of additional profits.
Hawkeye’s strategy is a cross between a fund-of-funds operator and a private equity investor. It takes equity stakes in “emerging” investment managers and allocates capital for them to run via separate accounts. It also encourages the managers to set up “sidecar” vehicles, likely capitalized by Hawkeye’s institutional investors, to co-invest with the separate accounts.
The prior fund completed raising $532.9 million of equity at its final close in 2014 and took on an additional $100 million in a co-investment vehicle. Both are nearly fully invested in two firms: Blue Moon Capital of Boston and Coretrust Capital of Los Angeles.
Blue Moon, which focuses on senior housing, was founded in 2013 by former Great Point Investors executive Kathryn Sweeney and Susan Barlow, former global head of client relations for RREEF. Hawkeye backed its first vehicle, a $252 million joint venture dubbed Blue Moon Senior Housing 1. The shop is now seeking to raise up to $500 million of equity for its debut commingled fund, Blue Moon Senior Housing 2.
Coretrust was formed in 2014 by three former executives of Los Angeles-based Thomas Properties: Thomas Ricci, Randall Scott and John Sischo. Hawkeye committed up to $300 million of equity to the platform.
Hawkeye was formed in 2004 by Claudia Faust and Scott McArtor. Faust was previously a principal at real estate consultant Pension Consulting Alliance of Portland, Ore. McArtor was formerly global head of investor services for CBRE Global Investors of Los Angeles.
The shop’s first vehicle, Scout Fund 1, held a final close on $689.1 million of equity in 2007. It invested in four platforms: fund operators Garrison Investment and Meadow Partners, both of New York; multi-family investor Alliance Residential of Phoenix; and industrial specialist Panattoni Development of Sacramento.